McKay signals some flexibility on tax cuts

Until now, Senate President John McKay has been opposed to the cuts in a tight year that includes a Medicaid shortfall.

Until now, Senate President John McKay has been opposed to the cuts in a tight year that includes a Medicaid shortfall.

TALLAHASSEE -- Floridians may see tax breaks this year after all.

State Senate President John McKay, who had taken a tough stance against tax cuts in a tight budget year, appears willing to budge on the issue, his chief budget writer said Tuesday.

"I think he's willing to move -- but just a tiny, tiny bit," said State Sen. Jim Horne, R-Orange Park, who is chairman of the Senate Appropriations Committee.

Horne said he expects the Legislature will ultimately approve a three- or four-day sales tax holiday for back-to-school shoppers. Gov. Jeb Bush had proposed a nine-day period during which shoppers could forego paying sales tax on clothing of less than $100.

In addition, Horne said he anticipates a small reduction in the intangibles tax on stocks, bonds and other investments -- one that would focus on raising the exemption levels so that fewer people have to pay the tax rather than lowering the tax rate itself.

Although Horne wouldn't guess at the size of the tax breaks, Senate Majority Leader Jim King said Tuesday that he expects a tax cut package of less than $100-million for the budget year beginning July 1.

Horne and King's statements Tuesday came at a time when the House and Senate have been deadlocked on the state budget, with the clock beginning to run out on the legislative session.

The state House proposed $355-million in tax breaks, mostly in the intangibles tax, and Gov. Bush proposed about $277-million.

But the Senate approved no tax breaks in its version of a state budget, with McKay insisting that Florida could not afford tax cuts in a difficult budget year.

Lawmakers have been grappling with a nearly $1-billion shortfall in the Medicaid budget and have proposed hundreds of millions of cuts in specific Medicaid programs, creating a furor amongst social service advocates and Democrats. (Overall, the Medicaid budget is expected to rise because lawmakers plan to cover deficits in the program in prior years and cover unexpected increases in clients for next budget year.)

House Speaker Tom Feeney and Gov. Bush have insisted that there is enough money available to give tax breaks as well as serve the needs of Floridians.

Tuesday, Feeney sent a letter to McKay, saying the House is willing to fund public education and Medicaid programs as the Senate had proposed. McKay's top priorities have been schools and programs affecting the elderly, poor and disabled. "In return, I would ask that the Senate match the House on tax relief; therefore keeping our promises to those we serve."

Feeney pointed out that the Senate has $100-million in its budget for local projects "that could be reprioritized to better serve Floridians."

The local projects, often called pork-barrel projects or "turkeys," are important to lawmakers who want to impress constituents back home. The Senate has $400-million in such projects in its budget; the House $300-million, according to estimates by the governor's office.

Feeney's letter was viewed as a breakthrough on the budget. McKay did not comment on the letter, but his spokeswoman said he planned to appoint budget negotiators later this week.

Lawmakers from the House and Senate iron out differences in their budget proposals, then send a final budget to the House and Senate floor for a vote. Gov. Bush has power to veto items in the budget.

- Times staff writers Lucy Morgan and Alisa Ulferts contributed to this report.